March 25th, 2014 / Insight posted in Articles

Tax Changes for UK resident, non-domiciled hedge fund managers

The Chancellor gave his Budget speech on Wednesday 19 March 2014, with a particular focus on tax avoidance. For many hedge funds and their managers, the impact of one particular change could be of particular concern.

If you are a UK tax resident, but non-domiciled, and receive income from more than one source, there are some significant changes to the way your tax will be calculated from April 2014.

The new rules for non-domiciles apply where:

  • Individual has both UK and overseas employments with the same employer or where employers are associated;
  • UK and overseas employments are related to each other;
  • Foreign tax rate that applies is less than 65% of the UK additional rate – e.g 65% of 45% = 29.25%

The main initiative behind this move is to try and combat tax motivated arrangements – e.g. trading via from the Cayman Islands – with the implication being that much of the work, relating to the non-domicile engagements, will actually be done from within the UK (i.e. conference calls, Skype, emails, etc).

Here is a summary of where the new rules may apply:

  • Income from overseas contracts taxed in UK on an arising basis
  • Tax treaty may override the above
  • Really looking at tax motivated arrangements
  • Let out for ‘nominal directorships’ – own < 5% of OSC
  • Detail revisions not published yet